KARACHI:
Once again, the government has introduced a controversial policy change that has created significant uproar among stakeholders in the energy sector as they brace for its impact. The net billing policy has replaced the net metering regime.
Previously, the consumers under net metering paid for the difference between the electricity they exported to the grid and the electricity they imported from it. Under the new regime, the consumers will pay different rates for the units they purchase from the grid and those they sell back to it, with the selling rate considerably lower than the purchase rate.
This shift in policy on electricity generation and grid distribution, labelled as the Prosumer Regulations 2026, has fundamentally altered the economics of solar energy investments in Pakistan. It has far-reaching implications not only for consumers who invested heavily in rooftop solar panels in recent years but also for industrial units, particularly exporters, that adopted this technology to benefit from cheaper and cleaner energy.
A recent study on trade policy measures to encourage green trade in Pakistan, published by the Consortium for Development Policy Research, states that the implementation of net metering created much-needed momentum for solar investment by households and industries. This momentum had the potential to improve consumer welfare, even among middle-income households, while also generating environmental benefits.
The 2024 report noted that solar energy was becoming a staple source of power generation due to its widespread adoption. Lower carbon intensity in the energy used by exporters can help increase exports to countries that impose stricter environmental regulations on trade, such as the European Union.
Although the surge in imports of solar panels and related environmental goods could adversely affect the trade balance, the economy stands to benefit through higher consumer welfare and increased exports as Pakistani firms comply with environmentally friendly regulations in destination markets. Therefore, any slowdown in the adoption of environmentally friendly energy production could adversely affect the economy, particularly as the government struggles to raise exports and reach the daunting $100 billion threshold.
According to statistics from ITC’s Trademap.org, Pakistan imported approximately $2.2 billion worth of photovoltaic cells in 2024, mainly from China at duty-free rates. However, solar imports in the first six months of FY26 declined sharply to $450 million, according to Pakistan Single Window data. Uptake has decreased likely due to policy uncertainty in the current fiscal year.
Pakistan was the fourth-largest importer of assembled solar panels in the world in 2024, after the United States, Brazil and India. Between 2020 and 2024, the growth rate was 53%, with Pakistan accounting for roughly 3% of global solar panel imports. The change in the billing regime is likely to alter this pattern as solar adoption slows and existing investors seek alternative ways to ensure continued returns from their investments.
Global trade in lithium-ion batteries has increased significantly in recent years, rising from $45 billion in 2020 to more than $120 billion in 2023. China has been the largest exporter in recent years, accounting for more than 50% of global export value since 2022. Its dominance in lithium-ion battery exports is likely to continue as it leverages access to raw materials and produces batteries more efficiently than competitors.
Pakistan imported more than $60 million worth of lithium-ion batteries in 2024, up from $9 million in 2019 but lower than the $76 million recorded in 2022. China supplies almost all lithium-ion batteries imported into Pakistan. As electricity consumers continue to face high grid costs, battery-based solutions may become more common, leading to a likely surge in demand.
It remains to be seen whether the government will introduce new policies to encourage such imports, particularly as it weighs the trade-off between promoting environmentally friendly investments and ensuring that wealthier households continue to draw electricity from the national grid.
Policy uncertainty will have adverse consequences for industrial sectors and exporters, especially as it becomes increasingly important for them to adopt environmentally friendly production practices to meet requirements in destination markets.
Solar systems installed in the future are likely to be smaller and designed primarily to meet internal needs rather than export surplus units. Changes in production practices may involve shifting electricity-intensive processes to peak sunlight hours. The shift from net metering to net billing makes it less lucrative to sell electricity to the grid, but it may also reduce demand for grid electricity as consumers move towards greater self-sufficiency. Consequently, new investments in solar panels will likely be determined by the daytime load of the investor.
The government has recently announced several incentive packages for exporters to enhance competitiveness in an evolving trading landscape, particularly as regional competitors gain improved market access in key destinations. Although the government expects overall electricity prices to decline under the new billing regime, external pressures remain significant.
The European Union’s Carbon Border Adjustment Mechanism penalises the consumption of carbon-intensive energy in exports destined for its market. As embedded emissions rise in production, so too does the carbon tax. The mechanism currently applies to selected products such as cement, steel, iron and aluminium, which are not prominent in Pakistan’s export basket. However, the next phase is likely to include textile products.
If textiles are covered, the shift towards greener energy will become even more critical for Pakistan’s export performance. It is therefore essential to ensure that households, industrialists and exporters continue to benefit as major stakeholders in the energy sector.
THE WRITER IS AN ASSISTANT PROFESSOR OF ECONOMICS AND A RESEARCH FELLOW AT CBER, INSTITUTE OF BUSINESS ADMINISTRATION, KARACHI. HE ALSO CHAIRS THE ECONOMIC ADVISORY GROUP
